Minnesota Legislature
HF 566
as introduced - 89th Legislature (2015 - 2016) Posted on 02/05/2015 01:45pm
Current Version - as introduced
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A bill for an act
relating to retirement; general state employees retirement plan of the Minnesota
State Retirement System; general employees retirement plan of the Public
Employees Retirement Association; Teachers Retirement Association; modifying
provisions directing criteria for making recommendations to adjust employee
and employer contribution rates; amending Minnesota Statutes 2014, sections
352.045; 353.27, subdivision 3b; 354.42, subdivisions 4b, 4d.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2014, section 352.045, is amended to read:
352.045 PROCEDURE FOR REVISING EMPLOYEE AND EMPLOYER
CONTRIBUTIONS IN CERTAIN INSTANCES.
Subdivision 1.
Application.
This section applies to the general state employees
retirement plan deleted text begin and todeleted text end new text begin established under this chapter,new text end the correctional state employees
retirement plan new text begin established new text end under this chapter, and deleted text begin todeleted text end the state patrol retirement plan
new text begin established new text end under chapter 352B.
Subd. 2.
Determination.
For purposes of this section, a contribution sufficiency
exists if, for deleted text begin purposes ofdeleted text end the applicable plan, the total of the employee contributions, the
employer contributions, and any additional employer contributions, if applicable, exceeds
the total of the normal cost, the administrative expenses, and the amortization contribution
of the retirement plan as reported in the most recent actuarial valuation of the retirement
plan prepared by the new text begin approved new text end actuary retained under section 356.214 and prepared under
section 356.215 and the standards for actuarial work of the Legislative Commission on
Pensions and Retirement. For purposes of this section, a contribution deficiency exists
if, for the applicable plan, the total employee contributions, employer contributions,
and any additional employer contributions are less than the total of the normal cost, the
administrative expenses, and the amortization contribution of the retirement plan as
reported in the most recent actuarial valuation of the retirement plan prepared by the
new text begin approved new text end actuary retained under section 356.214 and prepared under section 356.215 and
the standards for actuarial work of the Legislative Commission on Pensions and Retirement.
Subd. 3a.
Contribution rate revision; general state employees retirement plan.
(a) Notwithstanding the contribution rates deleted text begin stated in plan lawdeleted text end new text begin as specified in law governing
the applicable retirement plannew text end , the new text begin board of directors of the Minnesota State Retirement
System may adjust the new text end employee and employer contribution rates for the general state
employees retirement plan deleted text begin must be adjusted:
deleted text end
deleted text begin (1)deleted text end if the regular actuarial valuation of the plan new text begin prepared new text end under section 356.215
indicates that there is a contribution sufficiency greater than one percent of covered payrolldeleted text begin
and that the sufficiency has existed for at least two consecutive years, the employee and
employer contribution rates must be decreased as determined under paragraph (b) to a
level such that the sufficiency is no greater than one percent of covered payroll based
on the most recent actuarial valuation;deleted text end or
deleted text begin (2) if the regular actuarial valuation of the plan under section 356.215 indicatesdeleted text end that
there is a contribution deficiency new text begin under subdivision 2 new text end equal to or greater than deleted text begin 0.5deleted text end new text begin one-half
of one new text end percent of covered payroll deleted text begin and that the deficiency has existed for at least two
consecutive years, the employee and employer contribution rates must be increased as
determined under paragraph (c) to a level such that no deficiency exists based on the
most recent actuarial valuationdeleted text end .
(b) If the actuarially deleted text begin requireddeleted text end new text begin determined new text end contribution of the plan is less than the
total support provided by the combined employee and employer contribution rates by
more than one percent of covered payroll, the plan employee and employer contribution
rates deleted text begin mustdeleted text end new text begin may new text end be decreased incrementally over one or more years deleted text begin by no more than
0.25 percent of pay each for employee and employer contribution ratesdeleted text end to a level such
that there remains a contribution sufficiency of at least one percent of covered payroll.
deleted text begin No contribution ratedeleted text end new text begin Any new text end decrease deleted text begin may be made until at least two years have elapsed
since any adjustment under this paragraph has been fully implementeddeleted text end new text begin in employee and
employer contribution rates must not result in total contributions that are less than the sum
of the normal cost and administrative expenses of the retirement plannew text end .
(c) If the actuarially required contribution exceeds the total support provided by
the employee and employer contribution rates, new text begin the board of directors may increase new text end the
employee and employer contribution rates deleted text begin must be increaseddeleted text end equally to eliminate that
contribution deficiency. deleted text begin If the contribution deficiency is:
deleted text end
deleted text begin
(1) less than two percent, the incremental increase may be up to 0.25 percent each
for the employee and employer contribution rates;
deleted text end
deleted text begin
(2) greater than 1.99 percent and less than 4.01 percent, the incremental increase
may be up to 0.5 percent each for the employee and employer contribution rates; or
deleted text end
deleted text begin
(3) greater than four percent, the incremental increase may be up to 0.75 percent
each for the employee and employer contribution.
deleted text end
(d) new text begin To determine if an adjustment is to be made, the board of directors shall consult
with the approved actuary retained under section 356.214 and shall take into consideration
factors that include, but are not limited to, the contribution rates calculated based on the
actuarial value of assets and calculated based on the market value of assets; the funded
ratio calculated based on the actuarial value of assets; the funded ratio calculated based on
the market value of assets; the remaining number of years to the amortization target date;
the recent experience of the investment markets; and the results of the 30-year funding,
disbursements, and contribution projections prepared every other year as required under
the standards for actuarial work adopted by the Legislative Commission on Pensions
and Retirement.
new text end
new text begin (e) new text end Any deleted text begin recommendeddeleted text end adjustment to the contribution rates must be reported to
the chair and the executive director of the Legislative Commission on Pensions and
Retirement by January 15 following receipt of the most recent annual actuarial valuation
prepared under section 356.215. The report must include draft legislation to revise the
employee and employer contributions stated in plan law. If the Legislative Commission
on Pensions and Retirement does not recommend against the rate change or does not
recommend a modification in the rate change, the deleted text begin recommendeddeleted text end adjustment becomes
effective on the first day of the first full payroll period in the fiscal year following receipt
of the most recent actuarial valuation that gave rise to the adjustment.
deleted text begin (e)deleted text end new text begin (f) new text end A contribution sufficiency of up to one percent of covered payroll must be
held in reserve to be used to offset any future actuarially deleted text begin requireddeleted text end new text begin determined new text end contributions
that are more than the total combined employee and employer contributions.
deleted text begin (f)deleted text end new text begin (g) new text end Before any reduction in contributions to eliminate a sufficiency in excess of
one percent of covered pay may be deleted text begin recommendeddeleted text end new text begin madenew text end , the executive director must
review any need for a change in actuarial assumptions, as recommended by the new text begin approved
new text end actuary retained under section 356.214 in the most recent experience study of the general
employees retirement plan prepared under section 356.215 and the standards for actuarial
work promulgated by the Legislative Commission on Pensions and Retirement that may
result in an increase in the actuarially deleted text begin requireddeleted text end new text begin determined new text end contribution and must report to
the Legislative Commission on Pensions and Retirement any deleted text begin recommendationdeleted text end new text begin decision
new text end by the board to use the sufficiency exceeding one percent of covered payroll to offset the
impact of an actuarial assumption change recommended by the actuary retained under
section 356.214, subdivision 1, and reviewed by the actuary retained by the commission
under section 356.214, subdivision 4.
deleted text begin (g)deleted text end new text begin (h) new text end No contribution sufficiency in excess of one percent of covered pay may be
proposed to be used to increase benefits, and no benefit increase may be proposed that
would initiate an deleted text begin automaticdeleted text end adjustment to increase contributions under this subdivision.
Any proposed benefit improvement must include a recommendation, prepared by the
new text begin approved new text end actuary retained under section 356.214, subdivision 1, and reviewed by the
actuary retained by the Legislative Commission on Pensions and Retirement as provided
under section 356.214, subdivision 4, on how the benefit modification will be funded.
Subd. 3b.
Contribution rate revision; correctional state employees retirement
plan and State Patrol retirement plan.
(a) Subdivision 3a applies to the correctional
state employees retirement plan under this chapter and to the State Patrol retirement
plan established under chapter 352B, except as deleted text begin stated in this subdivisiondeleted text end new text begin specified in
paragraph (b) or (c)new text end .
(b) Any limitations on the amount of contribution rate changes stated in subdivision
3a apply only to the amount of the employee contribution revision. The employer
contribution for the correctional state employees retirement plan or the State Patrol
retirement plan, whichever is applicable, must be adjusted so that the employer
contribution is equal to 60 percent of the sum of employee plus employer contributions.
(c) For the State Patrol retirement plan, a contribution sufficiency of up to two
percent of covered payroll, rather than one percent, may be held in reserves without taking
action to reduce employee and employer contributions.
Sec. 2.
Minnesota Statutes 2014, section 353.27, subdivision 3b, is amended to read:
Subd. 3b.
Change in employee and employer contributions in certain instances.
(a) For purposes of this section:
(1) a contribution sufficiency exists if the total of the employee contribution under
subdivision 2, the employer contribution under subdivision 3, the additional employer
contribution under subdivision 3a, and any additional contribution previously imposed
under this subdivision exceeds the total of the normal cost, the administrative expenses,
and the amortization contribution of the general employees retirement plan as reported in
the most recent actuarial valuation of the retirement plan prepared by the actuary retained
under section 356.214 and prepared under section 356.215 and the standards for actuarial
work of the Legislative Commission on Pensions and Retirement; and
(2) a contribution deficiency exists if the total of the employee contributions under
subdivision 2, the employer contributions under subdivision 3, the additional employer
contribution under subdivision 3a, and any additional contribution previously imposed
under this subdivision is less than the total of the normal cost, the administrative expenses,
and the amortization contribution of the general employees retirement plan as reported in
the most recent actuarial valuation of the retirement plan prepared by the actuary retained
under section 356.214 and prepared under section 356.215 and the standards for actuarial
work of the Legislative Commission on Pensions and Retirement.
(b) new text begin Notwithstanding the contribution rate provision specified under subdivisions 2,
3, and 3a, the board of trustees of the Public Employees Retirement Association may
adjust the new text end employee and employer contributions to the general employees retirement plan
under subdivisions 2 and 3 deleted text begin must be adjusted:
deleted text end
deleted text begin (1)deleted text end if the regular actuarial valuation of the general employees retirement plan of
the Public Employees Retirement Association new text begin prepared new text end under section 356.215 indicates
that there is a contribution sufficiency under paragraph (a) greater than one percent of
covered payroll deleted text begin and that the sufficiency has existed for at least two consecutive years, the
coordinated program employee and employer contribution rates must be decreased as
determined under paragraph (c) to a level such that the sufficiency is no greater than one
percent of covered payroll based on the most recent actuarial valuation;deleted text end or
deleted text begin (2) if the regular actuarial valuation of the general employees retirement plan of the
Public Employees Retirement Association under section 356.215 indicatesdeleted text end that there
is a contribution deficiency new text begin under paragraph (a) new text end equal to or greater than deleted text begin 0.5deleted text end new text begin one-half
of one new text end percent of covered payroll deleted text begin and that the deficiency has existed for at least two
consecutive years, the coordinated program employee and employer contribution rates
must be increased as determined under paragraph (d) to a level such that no deficiency
exists based on the most recent actuarial valuationdeleted text end .
(c) If the actuarially deleted text begin requireddeleted text end new text begin determined new text end contribution of the general employees
retirement plan is less than the total support provided by the combined employee and
employer contribution rates under subdivisions 2, 3, and 3a, by more than one percent of
covered payroll, the general employees retirement plan coordinated program employee
and employer contribution rates under subdivisions 2 and 3 deleted text begin mustdeleted text end new text begin may new text end be decreased
deleted text begin incrementallydeleted text end over one or more years deleted text begin by no more than 0.25 percent of pay each for
employee and employer matching contribution ratesdeleted text end to a level such that there remains a
contribution sufficiency of at least one percent of covered payroll. deleted text begin No contribution rate
decrease may be made until at least two years have elapsed since any adjustment under
this subdivision has been fully implemented.deleted text end new text begin Any decrease in employee and employer
contribution rates may not result in total contributions that are less than the total of the
normal cost of the retirement plan and the administrative expenses of the retirement plan.
new text end
(d) If the actuarially deleted text begin requireddeleted text end new text begin determined new text end contribution exceeds the total support
provided by the combined employee and employer contribution rates under subdivisions
2, 3, and 3a, the new text begin board of trustees may increase the new text end employee and matching employer
contribution rates deleted text begin must be increased equallydeleted text end to eliminate that contribution deficiency.
deleted text begin If the contribution deficiency is:
deleted text end
deleted text begin
(1) less than two percent, the incremental increase may be up to 0.25 percent for the
general employees retirement plan employee and matching employer contribution rates;
deleted text end
deleted text begin
(2) greater than 1.99 percent and less than 4.01 percent, the incremental increase
may be up to 0.5 percent for the employee and matching employer contribution rates; or
deleted text end
deleted text begin
(3) greater than four percent, the incremental increase may be up to 0.75 percent for
the employee and matching employer contribution.
deleted text end
(e) deleted text begin The general employees retirement plan contribution sufficiency or deficiency
determination under paragraphs (a) to (d) must be made without the inclusion of the
contributions to, the funded condition of, or the actuarial funding requirements of the
MERF division.deleted text end new text begin To determine if an adjustment is to be made, the board of trustees shall
consult with the approved actuary retained under section 356.214 and shall take into
consideration factors that include, but are not limited to, the contribution rates based on
actuarial value of assets and contribution rates based on the market value of assets; the
funded ratio based on the actuarial value of assets and based on the market value of assets;
the number of years remaining to the amortization target date; the recent experience
of the investment markets; and the results of the 30-year funding, disbursements, and
contributions projections prepared every other year as required under the standards for
actuarial work adopted by the Legislative Commission on Pensions and Retirement.
new text end
(f) Any deleted text begin recommendeddeleted text end adjustment to the contribution rates must be reported to
the chair and the executive director of the Legislative Commission on Pensions and
Retirement by January 15 following the receipt of the most recent annual actuarial
valuation prepared under section 356.215. If the Legislative Commission on Pensions
and Retirement does not recommend against the rate change or does not recommend
a modification in the rate change, the recommended adjustment becomes effective for
any salary paid on or after the January 1 next following the legislative session in which
the Legislative Commission on Pensions and Retirement did not take any action to
disapprove or modify the Public Employees Retirement Association Board of Trustees'
deleted text begin recommendation to adjustdeleted text end new text begin adjustment to new text end the employee and employer rates.
(g) A contribution sufficiency of up to one percent of covered payroll must be held
in reserve to be used to offset any future actuarially deleted text begin requireddeleted text end new text begin determined new text end contributions
that are more than the total combined employee and employer contributions under
subdivisions 2, 3, and 3a.
(h) Before any reduction in contributions to eliminate a sufficiency in excess of one
percent of covered pay may be deleted text begin recommendeddeleted text end new text begin madenew text end , the executive director must review
any need for a change in actuarial assumptions, as recommended by the actuary retained
under section 356.214 in the most recent experience study of the general employees
retirement plan prepared under section 356.215 and the standards for actuarial work
promulgated by the Legislative Commission on Pensions and Retirement that may result
in an increase in the actuarially deleted text begin requireddeleted text end new text begin determined new text end contribution and must report to the
Legislative Commission on Pensions and Retirement any deleted text begin recommendationdeleted text end new text begin decision new text end by the
board to use the sufficiency exceeding one percent of covered payroll to offset the impact
of an actuarial assumption change recommended by the actuary retained under section
356.214, subdivision 1, and reviewed by the actuary retained by the commission under
section 356.214, subdivision 4.
(i) No contribution sufficiency in excess of one percent of covered pay may be
proposed to be used to increase benefits, and no benefit increase may be proposed that
would initiate an deleted text begin automaticdeleted text end adjustment to increase contributions under this subdivision.
Any proposed benefit improvement must include a recommendation, prepared by the
new text begin approved new text end actuary retained under section 356.214, subdivision 1, and reviewed by the
actuary retained by the Legislative Commission on Pensions and Retirement as provided
under section 356.214, subdivision 4, on how the benefit modification will be funded.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 3.
Minnesota Statutes 2014, section 354.42, subdivision 4b, is amended to read:
Subd. 4b.
Contribution rate revision.
new text begin (a) new text end Notwithstanding the contribution rate
provisions under subdivisions 2 and 3, thenew text begin board of trustees of the Teachers Retirement
Association may adjust thenew text end employee and employer contribution rates deleted text begin may be adjusted
as follows:
deleted text end
deleted text begin (1)deleted text end ifdeleted text begin , after June 30, 2015,deleted text end the regular actuarial valuation of the plan under section
356.215 indicates that there is a contribution sufficiency under subdivision 4a equal to or
greater than one percent of covered payroll deleted text begin and the sufficiency has existed for at least two
consecutive years, the employee and employer contribution rates for the plan may each be
decreased to a level such that the sufficiency equals no more than one percent of covered
payroll based on the most recent actuarial valuation;deleted text end or
deleted text begin (2)deleted text end ifdeleted text begin , after June 30, 2015,deleted text end the regular valuation of the plan under section 356.215
indicates that there is a deficiency equal to or greater than deleted text begin 0.25deleted text end new text begin one-half of onenew text end percent
of covered payroll deleted text begin and the deficiency has existed for at least two consecutive years, the
employee and employer contribution rates for the applicable plan may each be increased by:
deleted text end
deleted text begin
(i) 0.25 percent if the deficiency is less than two percent of covered payroll;
deleted text end
deleted text begin
(ii) 0.5 percent if the deficiency is equal to or greater than two percent of covered
payroll and less than or equal to four percent; and
deleted text end
deleted text begin (iii) 0.75 percent if the deficiency is greater than four percentdeleted text end .new text begin Any decrease in
employee and employer contribution rates must not result in the total of contribution rates
that is less than the total of normal cost and administrative expenses.
new text end
new text begin
(b) To determine if an adjustment is to be made, the board of trustees shall consult
with the approved actuary retained under section 356.214 and shall take into consideration
factors that include, but are not limited to, the contribution rates based on actuarial value of
assets and contribution rates based on the market value of assets; the funded ratio based on
the actuarial value of assets and based on the market value of assets; the number of years
remaining to the amortization target date; the recent experience of the investment markets;
and the results of the 30-year funding, disbursements, and contributions projections
prepared every other year as required under the standards for actuarial work adopted by
the Legislative Commission on Pensions and Retirement.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective July 1, 2015.
new text end
Sec. 4.
Minnesota Statutes 2014, section 354.42, subdivision 4d, is amended to read:
Subd. 4d.
Reporting; commission review.
A contribution rate increase or decrease
new text begin made new text end under subdivision 4bdeleted text begin , as determined by the executive director of the Teachers
Retirement Association,deleted text end must be reported to the chair and the executive director of the
Legislative Commission on Pensions and Retirement on or before the next February 1 and,
if the Legislative Commission on Pensions and Retirement does not recommend against the
rate change or does not recommend a modification in the rate change, is effective on the next
July 1 following the determination deleted text begin by the executive directordeleted text end that a contribution deficiency
or sufficiency exists based on the most recent actuarial valuation under section 356.215.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective July 1, 2015.
new text end